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Barclays has turn out to be the primary financial institution to raise the cap on bankers’ bonuses that was initially imposed by the EU, which can enable employess to earn as much as 10 instances their wage.
In a memo despatched to employees on Thursday, the financial institution stated the brand new bonus cap “mustn’t change colleague expectations round whole compensation”, which is not going to routinely enhance.
Final 12 months monetary regulators determined to take away the cap that restricted the quantity bankers might take residence in annual funds. The post-Brexit determination meant UK banks now not needed to observe EU guidelines.
The EU coverage was initially imposed to discourage extreme danger taking which was blamed for inflicting the 2008 monetary crash and subsequent worldwide financial meltdown.
The change brings Barclays in keeping with the coverage set by funding financial institution JP Morgan, amid efforts to draw high bankers.
In Could, HSBC shareholders pproved the elimination of a restrict on bankers’ bonuses. The financial institution stated eradicating the cap will give the financial institution extra flexibility to cut back fastened pay ranges and as a substitute focus extra on rewarding employees based mostly on efficiency over time.
It additionally stated it’ll assist it to draw and retain proficient individuals from worldwide markets exterior the EU, the place there is no such thing as a restrict on variable pay.
Former prime minister Liz Truss and chancellor Kwasi Kwarteng made the choice to scrap the cap on bankers’ bonuses in 2022, in a bid to encourage extra funding within the UK and enhance financial development.
Previous to its election victory, chancellor Rachel Reeves confirmed that Labour had no intention of bringing the cap on bankers bonuses, prompting criticism for some sections of the celebration, together with from former chief Jeremy Corbyn.
Barclays expects some 1,600 staff globally to be affected by the change, generally known as its “materials risk-takers”.
These members of employees will have the ability to earn as much as 10 instances their fastened wage in variable pay, which incorporates bonuses. Beforehand, the cap was set at twice the extent of fastened pay.
The financial institution stated the change will give it extra flexibility in terms of setting particular person bonuses inside a small pool of employees, and make it a extra aggressive place to work.
A spokesperson for Barclays stated: “The revised bonus cap is not going to alter the best way Barclays units its incentive pool, which is predicated on general group efficiency.
“It’s going to enable us better flexibility to distinguish particular person bonuses inside a small and outlined group of colleagues, enabling Barclays to proceed to compete successfully to retain and entice the very best expertise globally.”
Workers affected by the change will even not see their salaries lower consequently.
Materials risk-takers inside the EU, incorporating Eire, will proceed to have bonuses capped at twice their wage.
